Charitable Gifts of Artworks Part 2

George Bernard Shaw’s friend: “I have been invited to address the Royal Academy and they have given me 15 minutes. How can I tell them everything that I know in 15 minutes?”

Shaw replied, “If I were you, I would speak v-e-r-y s-l-o-w-l-y.”

Last month’s column told you half of what I know about the tax consequences of charitable contributions. Here’s the rest of the story.

Qualified appraisal and substantiation requirements must be met to qualify for the income tax charitable deduction. For a discussion of those rules for artworks and other gifts, see “Substantiating Charitable Gifts—Specimen Letter to Clients” at the end of this column.

Art Advisory Panel. Charitable gifts of artworks almost always present valuation issues. An appraisal by a respected, unbiased expert is key to substantiating a charitable deduction for a donated work of art. The Internal Revenue Service has its own experts: the Art Advisory Panel. Valuations of artwork exceeding $50,000 must be sent to the panel, though smaller claims may be referred as well.

Here is how the panel works:

Art valuation questions arising from audits of income, gift or estate tax returns in the District Offices may be referred to the National Office for review. Appraisals involving art works valued at $50,000 or more must be so referred.

The purpose of the panel meetings is to discuss and make recommendations regarding the acceptability of taxpayers’ appraisals of works-of-art. If the Panel recommends rejection of a taxpayer’s appraisal, it may also recommend a different valuation, the securing of additional information or consultation with a specialist.

Prior to the meetings, National Office art appraisers send photographs and written materials to the panelists concerning the works of art they will be evaluating. The written materials incorporate information from the taxpayer’s appraisal reports, as well as the results of the staff’s own authentication and market research. On a number of items, one or more of the panelists or staff will have seen the property itself and may comment on the adequacy of the taxpayer’s photograph and description. The panelists are sent all available probative information on each work, such as: size, medium and support, physical condition, history of ownership, public exhibitions and citations in literature. In addition, panelists are provided information on public and private sales of apparently similar works by the same artists. They are also informed as to the valuation date and the value actually claimed on the taxpayer’s tax return.

Other information, however, is not sent to the panelists, but may be orally introduced if and when necessary.

For example, if a work’s physical condition or aesthetic quality is uncertain, its location may be disclosed to facilitate planning an inspection of the work by one or more current panelists. That location information would be introduced even though it would tend to reveal whether the work was involved in a contribution or estate tax situation.

The effect and amount of the tax consequence of raising or lowering a valuation typically is not disclosed to the panelists. However, since charitable contribution items are virtually never valued conservatively, it's often obvious to the panelists as to whether the appraisal is for a contribution deduction or for estate tax purposes.

The identity of the taxpayer’s appraisers is revealed to the panelists only after they have reached their consensus, unless, prior to that time, the panel recommends IRS consultation with an outside specialist whom the taxpayer has already utilized.

Although taxpayers’ names are not sent out to the panelists, the prominence in the art world of many of the works being valued, or discussed as comparable sales, often results in the identities of taxpayers, and even other art buyers, being recognized by the panelists. This is the primary reason why panel meetings are closed to the public. To minimize recognition of taxpayers’ identities, the appraisal review discussion is held in alphabetical order by the artists’ last names. Appraisals of any one taxpayer’s collection are thereby interspersed with the appraisals of other taxpayers. The commingling of the collections minimizes the likelihood of recognition of a taxpayer’s entire collection as such.

After a panel meeting, the National Office art appraisers prepare a valuation report on each rejected appraisal. The reports are sent to the District Office which initially referred the taxpayer’s valuation. The reports are then made available to the taxpayers whose appraisals have been rejected. The referring districts are notified by memorandum on those cases having acceptable appraisals.

In some cases, a taxpayer may then secure additional information to better support the valuation. That information, if deemed substantive by the staff, is submitted to the panel for reconsideration at a subsequent meeting.

The panel’s expertise originally focused on Western art, but trends in art donation prompted the establishment of an IRS Print Panel and the expansion of the panel from 12 to 23 members in order to provide expertise in Oriental, pre-Columbian and primitive art. The 2012 panel consisted of 19 members.

The panel’s recently released 2012 annual report. The Fine Arts Panel met twice, reviewed 444 items with an aggregate taxpayer valuation of $281,859,200 on 43 taxpayer cases under consideration and recommended adjustments totaling $66,066,800. The panel recommended acceptance of 51 percent of the appraisals reviewed and adjustments on 49 percent. Two percent of the appraisals required additional staff development.

On the adjusted items, the panel recommended a 52 percent reduction in the amount claimed by taxpayers for income tax charitable deductions and a 47 percent increase in appraisals for non-charitable gifts. This has been the immutable pattern year after year: the IRS views taxpayers’ valuations as high for charitable transfers (for which income tax deductions are claimed) and low for non-charitable transfers (on which the IRS wants estate and gift taxes). Not surprisingly, taxpayers see it just the other way around.

The panel reconsidered 26 items in 3 taxpayer cases originally valued at $58 million by the taxpayers and $82,150,000 by the panel. After reviewing the additional information, the panel revised their recommendation to $82,650,000 on these items.

Donors may see Art Advisory Panel notes. The Bernardos gave a 21-foot granite sculpture to the Massachusetts Bay Transit Authority, claiming a $593,000 income tax charitable deduction. The IRS disallowed the deduction after its Art Advisory Panel determined that the sculpture’s fair market value was substantially less than that claimed by the donors. The Bernardos sued the IRS, demanding to see the panel’s notes; the IRS wanted to see the Bernardos’ documents. The Tax Court ordered the IRS to hand over the panel’s notes, stating that those notes aren’t protected by executive privilege because the purpose of holding closed-panel meetings is to protect taxpayers’ confidential information, not to protect intra-governmental communications. Some of the Bernardos’ valuation documents were protected by the attorney-client privilege, but others had to be furnished to the IRS because the Bernardos had waived that privilege. The work product doctrine protected documents prepared after the IRS notified the Bernardos of the panel’s findings. Bernardo, 104 TC 677 (1995).

Ruling—valuing art sold at auction. How do you value art works sold by an estate at auction? Sometimes, purchasers of art works pay a 10 percent “buyer’s premium” directly to the auction house. This payment is in addition to the “hammer price,” which is what the item sells for at auction.

In Letter Ruling 9235005, in a case not dealing with a charitable gift, an estate received the net proceeds of the sale (the total paid by the buyers, less the commission paid to the auction house) and reported that amount as the fair market value for inclusion in the gross estate. The IRS ruled that the fair market value of works sold at a public auction is the sale price, including any premium paid by the buyer to the auction house on the purchase. Comment. This is a harsh result because the estate doesn’t receive the buyer’s premium; therefore, it isn’t available for distribution to the beneficiaries.

Possible caveat. The fact that the premium may be included in the gross estate could be cause for concern, even though it may later be deducted as a sales expense. Elections that are available to reduce an estate tax liability (for example, special-use valuation, the ability to stretch out the period over which the tax on a closely held business is due) are keyed to the value of the gross and adjusted gross estates. Including the buyer’s premium in the gross (and hence also the adjusted gross) estate may affect those calculations.

“Buyers premium” for unrelated art gift. Generally, a sale by the charity soon after the gift makes the use unrelated. So, the higher fair market value (the addition of the 10 percent buyer’s premium) would not increase a donor’s charitable deduction on a gift of appreciated art works. Instead, the deduction would be limited to the basis. Suppose, however, that the fair market value is less than the basis. In that case, the deduction is for the fair market value and if that value can be increased under the 10 percent “buyer’s premium” rule, the donor would have an argument that the higher fair market value should be allowed (as long as it's still lower than the basis).

Post-contribution developments may affect valuation. The Dohertys donated a painting to a museum and claimed a $350,000 charitable deduction, believing that it had been painted by a famous artist. The IRS said the painting was a forgery worth $100. In computing the painting’s value, the Tax Court considered the doubts about the painting’s authenticity. The Dohertys appealed, arguing that the Tax Court shouldn’t have considered the dispute over authenticity because it didn’t arise until after the painting was donated. The Ninth Circuit affirmed. Doherty, 16 F.3d 338 (9th Cir. 1994). The facts forming the basis of the authenticity dispute existed when the painting was donated and would have affected the price a buyer was willing to pay for the painting. The appeals court also rejected the Dohertys’ claim that the Tax Court’s valuation was clearly erroneous, saying:

[C]omplex factual inquiries such as valuation require the trial judge to evaluate a number of facts: whether an expert appraiser’s experience and testimony entitle his opinion to more or less weight; whether an alleged comparable sale fairly approximates the subject property’s fair market value; and the overall cogency of each expert’s analysis. Trial courts have particularly broad discretion with respect to questions of valuation. [Citing Sammons, 838 F.2d at 333-34 (9th Cir. 1988), quoting Ebben, 783 F.2d 906, 909 (9th Cir. 1986).]

Advance valuation of artwork gifts. There’s a way for donors to pay the IRS a user fee and get a statement that could be used to substantiate the value of art gifts for income, gift and estate tax purposes. But the donor’s request for an IRS statement must be made before filing a tax return claiming the charitable deduction. And the donor must make the gift before trying to strike a valuation agreement with IRS.

What is art? Like beauty, it may be in the eye of the beholder. But for purposes of the IRS’s procedure, art includes “paintings, sculpture, watercolors, prints, drawings, ceramics, antique furniture, decorative arts, textiles, carpets, silver, rare manuscripts, historical memorabilia and other similar objects.” Rev. Proc. 96-15, 1996-1 CB 627.

What items are covered? Items that have been appraised at $50,000 or more and that have been transferred as a charitable gift during lifetime or at death. The IRS may issue a statement for lesser-valued items if: (1) at least one of the items is appraised at $50,000 or more; and (2) it determines that issuing a statement would be in the “best interest of efficient tax administration.” It may refuse to issue a statement “when appropriate in the interest of efficient tax administration.” In that case, the user fee will be refunded.

Contents of the request. The request must include: (1) a copy of a “qualified appraisal” of the artwork; and (2) a $2,500 fee for a statement for up to three items, plus $250 for each additional item. The fee won’t be refunded if a donor withdraws the request. Further, the request must be accompanied by a declaration that the information contained in it is accurate under penalties of perjury.

The qualified appraisal. Current appraisal requirements under Reg. Section 1.170A-13(c)(3) for gifts over $5,000 apply. And the following additional requirements must be satisfied:

The appraisal in support of the statement must include:

1.A complete description of the artwork including: (a) the name of the artist or culture; (b) the title or subject matter; (c) the medium, such as oil on canvas, or watercolor on paper; (d) the date created; (e) the size; (f) any marks, signatures, or labels on the artwork, on the back or affixed to the frame; (g) the history of the item, including proof of authenticity, if such information is available; (h) a record of any exhibitions at which the item was displayed; (i) any reference source citing the item; and (j) the physical condition of the item;

2.A professional quality photograph of a size and quality fully showing the item, preferably an 8 x 10 inch color photograph or a color transparency not smaller than 4 x 5 inches; and

3.The specific basis for the valuation.

A completed Section B, Donated Property Over $5,000 (formerly the appraisal summary) of Form 8283, Noncash Charitable Contributions, must also be included with the request.

How long will it take? Requests received by January 15 will ordinarily result in a statement being issued by June 30, and those received by July 15 will ordinarily result in a statement being issued by December 31.

When the IRS agrees with a donor’s appraisal. It will issue a statement approving the donor’s appraisal.

When the IRS disagrees. It will issue a statement indicating the basis of its disagreement and its own determination of value.

Whether or not there is an agreement. A copy of the IRS’s statement must be attached to and filed with the return on which the contribution was first reported. A donor who files a return before receiving the statement must indicate on the return that a statement has been requested and attach a copy of the request to the return. When the statement is received, the donor must then file an amended or supplemental return with the statement attached.

More ifs, ands, buts. A donor can rely on the IRS’s statement. Exceptions. But, you can’t rely on a statement issued to someone else or on a statement based on inaccurate statements of material facts. Rev. Proc. 96-15, 1996-1 CB 627.

Is the fee deductible? Apparently, a donor can deduct the cost of the IRS valuation statement as an Internal Revenue Code Section 212(3) deduction, not as a charitable deduction under IRC Section 170. IRC Section 212 allows a deduction for costs incurred in determining taxes due. That’s how the IRS ruled on the deductibility of the cost of an appraisal to back up a claimed charitable deduction. Rev. Rul. 67-461, 1967-2 CB 125. What’s the difference? A deduction is a deduction is a deduction. Right? An IRC Section 212(3) deduction is a “miscellaneous” deduction, only deductible above a 2 percent of adjusted gross income floor. IRC Section 67(a). And then, it is subject to the reduction rule of IRC Section 68 (Pease limitation).

SUBSTANTIATING CHARITABLE GIFTS — SPECIMEN LETTER TO CLIENTS

You have my permission to use this letter

Dear [client’s name]:

The federal government encourages your generosity by allowing you to deduct your gifts to charities on your income tax return if you itemize. However, you must follow the IRS’s reporting and substantiation rules to assure your charitable deduction. I hope that this letter highlighting the IRS’s requirements will be helpful to you when preparing your federal income tax return for the year 2012 (due by April 15, 2013).

For some noncash charitable gifts, Form 8283 (Noncash Charitable Contributions) must be filed. That form and its instructions are enclosed. The form is the latest available today. Before filing your income tax return, I suggest that you check the IRS’s latest forms and instructions for any last-minute changes.

If your noncash gifts for the year total more than $500, you’ll have to include Form 8283 with your income tax return. Section A — the simpler part of the form — is used to report gifts valued at $5,000 or under. Section A can be completed by you or your tax return preparer.

When the property’s value is more than $5,000 ($10,000 for closely held stock), you’ll generally need to have it appraised. The appraiser’s findings are reported in Section B of Form 8283. Those rules also apply if you give “similar items of property” with a total value above $5,000 — even if you gave the items to different charities. The IRS says that “similar items of property” are items of the same generic type, including stamps, coins, lithographs, paintings, books, nonpublicly traded stock, land and buildings. So, for example, if you have six paintings worth $1,000 each and contribute each one to six different charities, the appraisal rules would apply.

Special rule for publicly traded securities. You don’t need an appraisal or Section B of Form 8283 for gifts of publicly traded securities, even if their total value exceeds $5,000. But you must report those gifts (when the value is more than $500) by completing Section A of Form 8283 and attaching it to your return.

Closely held stock. For gifts of nonpublicly traded stock, an appraisal is not required as long as the value is not over $10,000, but part of Section B of Form 8283 must be completed if the value is over $5,000. And if the gift is valued at over $10,000, then both an appraisal and Section B of Form 8283 are required.

If you need an appraisal, the gift must be made within 60 days after the date of the appraisal. The property can be appraised after the date of the gift (the appraisal to state the property’s value on the date of the gift). You must receive the appraisal by the due date (including extensions) of the return on which the deduction is first claimed.

Section B of Form 8283. It must be signed by the appraiser and by the charity that received your gift. It’s essential to complete Section B of Form 8283 and to attach that form to your tax return.

Qualified appraisal. A qualified appraisal is an appraisal document that is prepared by a qualified appraiser in accordance with generally accepted appraisal standards and otherwise complies with the qualified appraisal requirements.

Qualified appraiser. The requirements to be a “qualified appraiser” are stringent. The definition is critically important: no qualified appraiser, no deduction for property gifts valued over $5,000 (over $10,000 for closely held stock).

Under the current definition, a qualified appraiser is an individual who (1) has earned an appraisal designation from a recognized professional appraiser organization or has otherwise met minimum education and experience requirements (established by the IRS in regulations); (2) regularly performs appraisals for which he or she receives compensation; and (3) can demonstrate verifiable education and experience in valuing the type of property for which the appraisal is being performed. An individual has education and experience in valuing the relevant type of property, as of the date the individual signs the appraisal, if the individual has: successfully completed (for example, received a passing grade on a final examination) professional or college-level coursework in valuing the relevant type of property, and has two or more years of experience in valuing the relevant type of property; or earned a recognized appraisal designation for the relevant type of property.

Ifs, ands, buts. A qualified appraiser may not be related to — or regularly employed by — you or the charitable donee and may not be a party to the transaction by which you acquired the property being appraised, unless the property being appraised is donated within two months of the date of acquisition and its appraised value does not exceed the purchase price.

Appraisal fee. Generally, no part of the appraisal fee can be based on a percentage of the property’s appraised value. An appraisal fee isn’t a charitable gift. If you itemize, the appraisal fee is deductible on your income tax return as a miscellaneous deduction. But it’s only deductible if it — together with other miscellaneous deductions — exceeds a 2% of adjusted gross income floor.

Special rule for art gifts. If you donate artworks with a total value of $20,000 or more, your return has to include a copy of the signed appraisal itself, not just Section B of Form 8283. If any single artwork is worth $20,000 or more, IRS may ask you for an 8 × 10 color photo (or a 4 × 5 color slide) of the donated property. You don’t have to send the photo with your tax return, just have one ready.

Special rule for very large gifts. For gifts valued at over $500,000, the donor must attach the qualified appraisal — as well as Section B of Form 8283 — to his or her tax return. For purposes of the dollar thresholds, property and all similar items of property donated to one or more charitable donees are treated as one property. As noted above, a copy of the appraisal must be attached to the tax return when an artwork is worth $20,000 or more.

Gifts of clothing or household items. No deduction is allowed for a contribution of clothing or a household item unless the item is in good condition or better at the time of the contribution and the donor meets the substantiation requirements. This rule doesn’t apply to a contribution of a single item of clothing or a household item for which a deduction of more than $500 is claimed if the donor submits with the return on which the deduction is claimed a qualified appraisal prepared by a qualified appraiser and a completed Form 8283 (Section B).

The term household items includes furniture, furnishings, electronics, appliances, linens, and other similar items. Food, paintings, antiques, and other objects of art, jewelry, gems, and collections are not household items.

Used car donations. The deduction for charitable contributions of autos, other motor vehicles, boats and airplanes exceeding $500 depends on the use of the vehicle by the charity. A deduction is not allowed unless the taxpayer substantiates the contribution by a contemporaneous written acknowledgment by the charity.

If the charity sells the vehicle without any significant intervening use or material improvement of the vehicle, the deduction is the smaller of the gross proceeds from the sale or the vehicle’s fair market value on the date of the contribution. The acknowledgment, which is on IRS Form 1098-C (or a statement containing the same information), must contain the name and taxpayer identification number of the donor, and the vehicle identification (or similar) number. The acknowledgment must provide a certification that the vehicle was sold in an arm’s length transaction between unrelated parties, and state the gross proceeds from the sale.

If the charity makes a significant intervening use or makes a material improvement to the vehicle, the deduction is the fair market value at the time of the contribution. The acknowledgment must contain a certification of the use or material improvement of the vehicle and the duration of that use, and a certification that the vehicle will not be transferred in exchange for money, other property, or services before completion of that use or improvement.

If the charity gives or sells the vehicle to a needy individual at a price significantly below fair market value in direct furtherance of a charity’s charitable purpose of relieving the poor and distressed or the underprivileged who are in need of a means of transportation, the deduction is the fair market value at the time of the contribution. You must obtain an acknowledgment from the charity and substantiate the fair market value.

Contemporaneous written acknowledgment. The charity must provide a written acknowledgment within 30 days of sale of a vehicle that is not significantly improved or materially used by the donee, or, in all other cases, within 30 days of the contribution.

Penalties. A charity will be penalized for knowingly furnishing a false or fraudulent acknowledgment, or knowingly failing to furnish a timely acknowledgment showing the required information.

You might want an appraisal (even if your gift doesn’t require one) in case you have to convince the IRS of the property’s worth. And Form 8283 asks how you valued your gift.

Generally, if a charity receives a gift that is subject to the appraisal rules (and it signed Form 8283), the charity must report on Form 8282 to both the IRS and the donor if it disposes of the gift within three years. However, the charity needn’t report its disposal of an item that you certify is worth $500 or less. Form 8283 has a section for that purpose (Section B, Part II).

Bank record or written communication required. No income tax charitable deduction is allowed for a gift in the form of cash, check, or other monetary gift unless the donor substantiates the deduction with a bank record or a written communication from the donee showing the donee’s name, the contribution date, and the gift amount.

Monetary gift includes a transfer of a gift card redeemable for cash, and a payment made by credit card, electronic fund transfer, an online payment service, or payroll deduction.

Bank record includes a statement from a financial institution, an electronic fund transfer receipt, a canceled check, a scanned image of both sides of a canceled check obtained from a bank website, or a credit card statement.

Written communication includes electronic mail correspondence.

Substantiation of charitable contributions of less than $250. An income tax charitable deduction isn’t allowed for noncash charitable contributions of less than $250 unless the donor maintains for each contribution a receipt from the donee showing: (1) the name and address of the donee; (2) the date of the contribution; (3) a description of the property in sufficient detail under the circumstances (taking into account the value of the property) for a person who is not generally familiar with the type of property to ascertain that the described property is the contributed property; and (4) for securities, the name of the issuer, the type of security and whether the securities are publicly traded securities.

Substantiation requirements for contributions of $250 or more. To deduct any gift of $250 or more, you must have a written receipt from the charity describing (but not valuing) the gift. If any goods or services were given to you in exchange for your gift, the receipt must describe them and contain a good faith estimate of their value. If the charity provided no goods or services in consideration of your gift, the written receipt must so state. The receipt need not contain your Social Security number. Generally, separate payments are considered separate contributions for purposes of the $250-or-more threshold unless the payments are made on the same day.

Cash gifts. For cash gifts, regardless of the amount, recordkeeping requirements are satisfied only if the donor maintains as a record of the contribution, a bank record or a written communication from the donee showing the name of the donee and the date and amount of the contribution. A bank record includes canceled checks, bank or credit union statements and credit card statements. Bank or credit union statements should show the name of the charity and the date and amount paid. Credit card statements should show the name of the charity and the transaction posting date. The recordkeeping requirements will not be satisfied by maintaining other written records. Donations of money include those made in cash, by check, electronic funds transfer, credit card and payroll deduction.

Contributions made by payroll deduction. For a charitable contribution made by payroll deduction, a donor is treated as meeting the substantiation requirements if no later than the date for receipt of substantiation the donor obtains: (1) a pay stub, Form W-2, “Wage and Tax Statement,” or other employer-furnished document that sets forth the amount withheld during the taxable year for payment to a donee; and (2) a pledge card or other document prepared by or at the direction of the donee that shows the name of the donee.

Transfers to charitable remainder trusts. The above substantiation requirements don’t apply to a transfer of cash, check, or other monetary gift to a charitable remainder annuity trust or a charitable remainder unitrust. The requirements do apply, however, to a transfer to a pooled income fund. So it is necessary to get a timely receipt meeting the $250-or-more substantiation rules for a gift to a pooled income fund.

Transfers to gift annuities. When the gift portion of a gift annuity or a deferred payment gift annuity is $250 or more, a donor must have an acknowledgment from the charity stating whether any goods or services — in addition to the annuity — were provided to the donor. If no additional goods or services were provided, the acknowledgment must so state. The acknowledgment need not include a good faith estimate of the annuity’s value.

Charitable remainder gifts in personal residences and farms. Regulations don’t specifically deal with these gifts. However, to be safe, get a timely receipt meeting the $250-or-more substantiation rules.

Grantor charitable lead trusts for which an income tax charitable deduction is allowable. The regulations don’t specifically deal with these gifts. Charitable remainder trusts, as stated above, aren’t subject to the substantiation rules. Charitable lead trusts may also be exempt. Nevertheless get a timely receipt meeting the $250-or-more rules.

THE RECEIPT-IN-HAND RULE — THIS IS CRUCIAL: You must have the receipt in your possession before you file your income tax return. If you file your return after the due date (or after an extended due date), the receipt must nevertheless have been in your hand by the due date (plus any extensions).

If you made a gift of $250 or more to a religious organization and received in return solely an intangible religious benefit that generally isn’t “sold in commercial transactions outside the donative context” (e.g., admission to a religious ceremony), the receipt must say so, but need not describe or value the benefit. But this exception doesn’t apply, for example, to tuition for education leading to a recognized degree, travel services, or consumer goods.

If a charity receives a gift of over $75 from you for which you received or were entitled to a benefit (other than solely an intangible religious benefit). The charity must, in connection with the solicitation or receipt of the gift, give you a written statement that: (1) informs you that the gift deduction is limited to the excess of any money (and the value of any property other than money) contributed by you

over the value of the goods or services provided by the charity; and (2) provides you with a good faith estimate of the value of the goods or services.

However, both you and the charity may generally disregard token benefits you receive for a contribution. The IRS has ruled that a charitable gift is fully deductible if it is made in a fundraising campaign in which the charity informs its donors how much of their payment is a deductible contribution and: (1) the donor receives benefits having a fair market value of $99 or 2% of the payment, whichever is less; or (2) the donor gives the charity at least $49.50 and receives a low-cost or token item (e.g., a bookmark, mug or T-shirt). The item must bear the charity’s name or logo and cost the distributing charity — or the charity on whose behalf the item is distributed — no more than $9.90.

Further, donors needn’t reduce their deductions when they receive unsolicited free items that cost the charity — or the charity on whose behalf the item is distributed — no more than $9.90.

Those token benefit amounts are for 2012 charitable gifts. The dollar figures are adjusted annually for inflation.

Please call if you have any questions — and the earlier the better so that last-minute problems can be avoided.